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Analysis of Contribution Report of Electoral Trusts for FY 2013-14

5Feb2015

Press Release

Analysis of Contribution Report of Electoral Trusts for FY 2013-14

Feb 5, 2015

Introduction

The Central Government amended the Income Tax Rules, 1962 on the 31st January, 2013 to insert Rule 17CA which lists the functions of Electoral Trusts approved by the Central Bureau of Direct Taxes (CBDT). The Central Government, simultaneously, notified ‘The Electoral Trusts Scheme, 2013’ which specified the eligibility procedure and format for registration as an Electoral Trust. The amendment and the scheme were introduced for the registration of Electoral Trusts whose sole purpose was to fund registered political parties in a transparent manner. The notification can be accessed here.

The Election Commission of India (ECI) had circulated Guidelines for submission of contribution reports of Electoral Trusts on the 6th June, 2014 wherein instructions were issued to all the Electoral Trusts formed after January,’13 (hence approved by the CBDT), to submit an Annual Report containing the following details to the Commission apart from an audit report in the format specified in the amended rules, in the interest of transparency:

Details of contributions received by the Electoral Trusts.

Details of donations given by the Trust to political parties.

These guidelines were issued to 7 Electoral Trusts formed after January, 2013, and included Satya Electoral Trust, Pratinidhi Electoral Trust, People’s Electoral Trust, Progressive Electoral Trust, Janhit Electoral Trust, Bajaj Electoral Trust and Janpragati Electoral Trust. Of the above 7 Trusts, Satya Electoral Trust is the only Trust to submit its complete Annual Report to the ECI. The following report of ADR/ NEW analyses the details of donors of Satya Electoral Trust and the contributions made by the Trust to political parties during FY 2013-14.

Executive Summary

Five National Parties, INC, NCP, BSP, CPI, CPM submitted their contributions statements, above Rs 20,000, for the FY 2013-14 to the ECI. BJP is the only National Party which has not submitted its contribution report. While BSP declared nil income above Rs 20,000, the total income of the four National Parties from known sources of funding was Rs 76.93 crores. But the total donations declared by Satya Electoral Trust to National Parties amounts to Rs 81.87 crores (including donations to BJP).

1. Format for submission of contributions report by the Electoral Trusts to the ECI

a. The Electoral Trusts are required to submit the following 3 documents to the Election Commission of India:

i. Annexure

aa. Part A – Basic information of the Electoral Trust

ab. Part B – Details of contributions received in the financial year

ac. Part C – Details of donations made by the Trust to political parties

ad. Part D – Verification by a person authorized by the Trust

ii. Audit report by a certified Chartered Accountant

iii. Compliance certificates from Corporate donors

2. List of Electoral Trusts formed after 31st January, 2013

Based on the information available with the Ministry of Corporate Affairs, a list of all Electoral Trusts formed after January, 2013 and approved by the CBDT is given below. Details of ownership of the Electoral Trusts were collected based on media reports and research on directorships in other companies.

S. No.

Name of the Electoral Trust

Company/ conglomerate which set up the Trust*

1

Janhit Electoral Trust

Vedanta Group

2

Satya Electoral Trust

Bharti Group

3

People’s Electoral Trust

Reliance Group

4

Mahindra Electoral Trust Company

Mahindra Group

5

Progressive Electoral Trust

Tata Group

6

Paribartan Electoral Trust

MP Birla Group

7

Bajaj Electoral Trust

Bajaj Group

8

Triumph Electoral Trust

Murugappa Group

9

Kalyan Electoral Trust

Bharat Group

10

Janta Nirvachak Electoral Trust

Kotak Group

11

Jagrut Electoral Trust

Lodha Group

12

New Democratic Electoral Trust

Mahindra Group

13

Samaj Electoral Trust Association

KK Birla Group

14

Gauri Welfare Association Electoral Trust

Jain Group

15

Sardar Vallabhbhai Patel Electoral Trust

Sardar Vallabhbhai Patel Party (Political Party)

1

Pratinidhi Electoral Trust

Not known

2

Reformative Electoral Trust of India

Not known

3

Bhartiya Socialist Republican Electoral Trust

Not known

4

Harmony Electoral Trust

Not known

5

Jankalyan Electoral Trust

Not known

6

Janpragati Electoral Trust

Not known

7

Ambar Electoral trust

Not known

8

Swadeshi Electoral trust

Not known

9

Ashmita Electoral trust

Not known

* Details of ownership of the Electoral Trusts were collected based on media reports, research on directorships in other companies and registration address of the company/ Trust

3. Contributions received and disbursed by Satya Electoral Trust during FY 2013-14

a. According to the rules formulated by the Central Government, Electoral Trusts are required to donate 95% of their total income to registered political parties in a financial year.

b. Satya Electoral Trust received a total amount of Rs 85.406 crores from corporates and individuals and distributed Rs 85.37 crores (99.96%) to various political parties.

4. Contributions made by Corporates

Bharti Airtel Ltd. contributed the maximum amount of Rs 28 crores which formed 33% of total donations to Satya Electoral Trust followed by DLF Ltd. which donated Rs 20 crores and constituted 23% of total donations.

Shri Akhil Gupta, Vice Chairman of Bharti Enterprises and Executive Chairman of Bharti Infratel Ltd. is the only individual to contribute to political parties through Satya Electoral Trust. He donated Rs 2 crores (2% of total donations to Satya Electoral Trust).

5. Total contributions as a Group of Companies

The parent companies of all the corporate donors have been termed as Group of companies and is not a part of the submission made by Satya Electoral Trust

As Satya Electoral Trust was set up by the Bharti Enterprises, the parent company donated the maximum amount of Rs 36 crores to be disbursed to political parties and formed 42.16% of total donations to the Electoral Trust.

BJP, INC and NCP were the three National Parties to which Satya Electoral Trust made contributions.

BJP was the recipient of the maximum amount of Rs 41.37 crores (48.44% of total donations to the Trust) followed by INC with Rs 36.50 crores (42.74% of donations to the Trust).

SAD, RJD and J&KNC are the three Regional Parties to which the Trust made donations. SAD received Rs 2 crores and RJD received Rs 1 crore.

Name of the Political Party

Total Donations disbursed to political parties (Rs. in crores)

% of donations made from income of Trust

BJP

41.37

48.44%

INC

36.5

42.74%

NCP

4

4.68%

SAD

2

2.34%

RJD

1

1.17%

J&KNC

0.5

0.59%

Total donations

Rs 85.37 crores

99.96%

7. Direct donations made by the corporates to political parties

Apart from the donations by corporates to Satya Electoral Trust, ADR/NEW analysed the donations by the same corporates who also donated separately to political parties between FY 2004-05 and 2013-14.

National Engineering Industries Ltd. of C.K.Birla Group donated 5 times to INC and BJP between FY 2004-05 and 2012-13. The company donated a total amount of Rs 87.50 lakhs to BJP and Rs 1.875 crores to INC.

It is to be noted that National Engineering Industries Ltd. donated Rs 1 crore to INC directly and Rs 2 crores to Satya Electoral Trust during FY 2013-14.

GMMCO Ltd. is the only other corporate which donated to Satya Electoral Trust but had also made donations directly to political parties between FY 2004-05 and 2012-13. The company donated an amount of Rs 37.50 lakhs each to INC and BJP during FY 2009-10.

Name of the corporate

Political party donated to*

Amount of contribution

Financial Year

National Engineering Industries Ltd.

BJP

Rs 37.50 lakhs

2009-10

BJP

Rs 50 lakhs

2012-13

INC

Rs 37.50 lakhs

2009-10

INC

Rs 50 lakhs

2012-13

INC

Rs 100 lakhs

2013-14

Total

Rs 2.75 crores

GMMCO Ltd.

BJP

Rs 37.50 lakhs

2009-10

INC

Rs 37.50 lakhs

2009-10

Total

Rs 75 lakhs

*BJP has not submitted its donations report for FY 2013-14 hence donations from the above corporates for FY 2013-14 cannot be verified

Recommendations of ADR

1. 6 Electoral Trusts had donated a total amount of Rs 105 crores to the National Parties between FY 2004-05 and 2011-12, before the transparency rules governing contributions to Electoral Trusts were formulated by the Central Government. As the rules are not retrospective, these 6 Electoral Trusts are not required to follow the transparency rules and declare their donor details. Thus, details of donors to these 6 Electoral Trusts remain unknown thereby leading to speculation on whether donations to these Trusts was only a means of getting tax exemption or a way to convert black money stashed in tax havens to white money in India.

Therefore details of donors of Rs 105 crores donated to political parties by the six Electoral Trusts which were formed before the CBDT rules came into existence, should also be disclosed. These Trusts include General Electoral Trust, Electoral Trust, Harmony Electoral Trust, Corporate Electoral Trust, Bharti Electoral Trust and Satya Electoral Trust. Also, the same rules which apply to those Trusts formed after 31st January, 2013, should also apply to the above mentioned Trusts so as to improve transparency.

2. The names of Electoral Trusts, currently, do not indicate the name of the Company/ group of companies which set up the Trusts. In order to have greater transparency regarding details of corporates which fund political parties, it would be ideal to include the name of the parent company in the name of the Electoral Trust.

3. Those Electoral Trusts which have not responded to and complied with the guidelines circulated by the ECI should be heavily penalized as indicated in the notification to the Trusts.